The Chimera of Small Stock Outperformance: Market Anomaly or Investor Self-Deception?

Abstract

Many investors suppose the outperformance of small stocks to be settled knowledge backed up by academic research. This article shows that the historical evidence for small stock outperformance is much more ambiguous than conventionally understood. Based on truncated views of the historical record and a misinterpretation of what the academic research shows, investors appear to have deceived themselves about the performance boost to be expected from owning smaller stocks.